How to Determine How Much Your Employees’ Time Is Worth

There are often extra tasks that need to be done in a business. To determine whether it is best to do them in-house or outsource them, it helps to know what your employees’ time is worth. Here is a straightforward calculation you can use.

In small and midsized businesses, there are often tasks that need to be done but they do not warrant hiring an employee to perform them. For example, a business might need someone to clean the office once a week, back up files every evening, or complete a one-time project.

Having employees do these extra tasks might seem like a good idea, but it might not be the best choice for the bottom line. Having an employee perform $25-an-hour work when their time is worth $50 per hour does not make financial sense.

To make an informed decision, you need to know how much an employee’s time is worth. There are several ways to calculate this value. An Inc. magazine columnist suggests using this equation:

(Annual salary + Monetary value of benefits) / Number of real hours worked per year

For example, suppose Gayle and Bob, both architects at a small business, work 2,000 hours a year (40 hours per week for 50 weeks). They make $60,000 a year and receive benefits worth $20,000. Their time is worth $40 an hour ((60,000 + 20,000) / 2,000).

Having Gayle and Bob take a couple of hours each week to help clean the office would cost $640 a month ($80 per week per person). That is a high cost to pay, considering that some cleaning services charge as little as $200 per month for small offices that need light cleaning.

Besides not making financial sense, sometimes it does not make good business sense to have employees do extra tasks that are unrelated to their jobs. There are only so many hours in a workday. Doing extra tasks means that employees have less time to do the work for which they were hired. To get everything done, employees might hurry, which could hurt the quality of their work.

It can also lead to discontentment. Employees might resent having to do those extra tasks. They also might dislike having to work more hours if they cannot get everything done during the normal workday. This can especially be a sore spot for exempt employees since they do not get paid for overtime.

By knowing what your employees’ time is worth, you can determine whether it is best to do extra tasks inhouse or pay someone else to do them. If you find that it does not make sense for your staff to perform routine or one-time IT tasks, we can take care of them for you.

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